EDITORIAL: Equalization inequality

The News

Published: Dec 11, 2018 at 6 a.m.

Equalization Santa has delivered goodies for some provinces, and lumps of coal for others. — 123RF Stock Photo

Equalization Santa has made his round of the provinces, where stockings have been hung by the chimneys with care, leaving the requisite sugarplums for Quebec, Manitoba, Nova Scotia, Prince Edward Island and New Brunswick.

Ontario was in the lump-of-coal cohort this year for the first time in a decade, joining Alberta, Saskatchewan, British Columbia and Newfoundland and Labrador.

In theory, equalization is the great equalizer, ensuring that all provinces can provide the same quality of services to citizens taxed at similar levels, as enshrined in the Constitution.

That’s the theory.

And when it works, it works well.

But it doesn’t work for everyone. One only need consider the precipitous state of Newfoundland and Labrador’s finances, with record debt of nearly $15 billion and nary of a cent of equalization to be had.

One of the factors that affects equalization is that it takes into account revenues that provinces generate from non-renewable resources, and — on paper — Newfoundland and Labrador generates high per capita revenues. But its citizens are also heavily taxed.

If equalization truly needs a reboot, it can only be accomplished if all provinces work together for a fairer program — and not just to protect their own share.

N.L., along with Alberta and Saskatchewan, wants changes to the formula but federal Finance Minister Bill Morneau says there has already been extensive discussion and equalization will stay as is for the next five years. It’s doubtful any amount of clamouring will change his mind.

Should equalization be revamped?

It’s easy to feel it should if you are in a province with a stagnant economy that does not receive a piece of the pie. And it’s easy to point fingers at provinces that are beneficiaries. But no one should begrudge provinces receiving funds they qualify for fair and square under the existing formula.

Quebec, for example, is getting more this year than last, over $13 billion of the $20-billion pot. But don’t let the large number fool you. With roughly one-quarter of the country’s people and a population of close to 8.5 million, equalization doesn’t stretch as far in Quebec as it does in some of the smaller provinces that receive it.

Of course, it’s not fashionable to defend Quebec, because equalization is finite and divisive and the only way to get a bigger chunk for your own province is to argue another deserves less.

And herein lies the problem. If equalization truly needs a reboot, it can only be accomplished if all provinces work together for a fairer program — and not just to protect their own share.

Newfoundland and Labrador Finance Minister Tom Osborne made a similar observation in an interview last summer with The Canadian Press.
“On almost any other issue that’s put on the table, we work as nation,” he said. “But when you’re talking about equalization, you have ... 10 provinces who each want to protect their own turf. … The spirit and the intent of the constitutional obligation for equalization, I don’t believe, is being lived up to.”